Despegar, the largest online travel company in Latin America, has announced a new 10-year agreement with Expedia Group that will allow them to expand their own directly sourced non-Latin America hotel supply and establish new strategic partnerships. This agreement comes as a result of an existing partnership that restricted Despegar to using Expedia Group hotel supply for the majority of their inventory outside of Latin America, hindering their expansion ambitions. With this new agreement, Despegar will have more flexibility to grow their B2B and M&A strategies, enabling them to enhance their business internationally.
Expedia Group, as Despegar’s second largest shareholder with a 13.3% stake, will have guaranteed access to a percentage of Despegar’s global hotel bookings and exclusive rights to distribute certain lodging supply in Latin America. The new agreement will provide Despegar with increased flexibility to grow their business and establish new strategic partnerships, while also allowing them to amortize a $125 million liability over 10 years, thus improving their net asset position. Expedia and Despegar both see opportunities for growth in the B2B segment, as it allows them to penetrate international markets where their B2C businesses may face challenges.
Despegar’s B2B business saw a 43% year-over-year growth in the second quarter, with the majority of it coming from Brazil and Mexico. However, the company hopes to expand this business to regions like Europe in the future. Expedia pays monthly commissions to Despegar based on the gross booking value generated by using Expedia’s hotel supply. Under the previous agreement, Despegar faced a $125 million termination fee if commission amounts did not reach at least $5 million every six months. The new agreement will alleviate this liability and allow Despegar to focus on expanding their business.
Both Expedia and Despegar view B2B as a significant opportunity for growth, particularly in international markets. Expedia, being the largest player in the travel industry with over 60,000 partners, sees B2B as a way to expand their reach globally. By granting Despegar more flexibility to grow their business and establish new partnerships, the agreement will benefit both companies and help them navigate the competitive travel market. With Expedia Group’s extensive lodging supply and Despegar’s market presence in Latin America, the partnership has the potential to drive significant growth and innovation in the online travel sector.
The partnership between Despegar and Expedia Group has been in place since 2015, with Expedia first taking a stake in Despegar at that time. Expedia’s access to Despegar’s global hotel bookings and exclusive rights to distribute certain lodging supply in Latin America will allow them to strengthen their position in the online travel market. This agreement marks a significant development in the relationship between the two companies and sets the stage for future growth and collaboration in the industry. By having more flexibility to grow their businesses and establish new partnerships, both Expedia and Despegar are well-positioned to navigate the evolving travel landscape and meet the changing needs of travelers worldwide.
